The cold war in clean energy

The Obama administration challenged China's support of its solar, wind, battery, and electric-car industries. Such disputes can be avoided with clear global rules on government aid to these necessary energy technologies.

Bythe Monitor's Editorial BoardOctober 19, 2010

Last week the United States blew a cold wind into a once-friendly contest among a few nations to dominate global markets in renewable energy. It decided to probe China’s benefits for its electric-car, battery, solar, and wind industries – with the implied threat of trade sanctions.

This US challenge to China runs counter to their recent cooperation on clean-energy research and to the mutual trade and investment in renewables by American and Chinese companies. That explains why Beijing erupted in surprise and anger to the Obama administration’s move. It accused the US of also subsidizing its own budding clean-energy industries and President Obama of simply playing for union votes before November’s election.

This won’t be easy. Current procedures of the World Trade Organization may not be adequate to resolve disputes over what is a subsidy, a trade barrier, or an otherwise unfair advantage. Also, these new industries may not be able to live with the uncertainty and the time it takes for WTO decisions. Pressures are strong on each country to favor their clean-energy industries and create jobs in this new market.

“We are in a race to develop clean energy technologies around the world,” US Energy Secretary Steven Chu said last year, adding that the “cost of inaction is that we will forfeit our leadership in the second Industrial Revolution.”

Germany, Japan, Spain, and South Korea are among other industrialized countries seeking to become major clean-energy exporters through various means of creating a strong domestic market in renewables.

Germany, for instance, forces electricity consumers to pay nearly four times the rate paid in the US to help subsidize its solar-power industry. Spain, on the other hand, tried to subsidize its solar industry but recently faltered in the face of a fiscal crisis.

Last year, Mr. Obama and Congress allocated some $60 billion in investments for clean energy, with Obama also making a gesture last week in ordering solar panels installed on the White House. The 2009 stimulus package also included a “buy American” provision for federal spending on renewables, a move similar to practices in China.

The US challenge to China comes out of fear that Chinese companies might have an unfair head start in exporting low-cost electric-car, solar, or wind technologies, choking off the ability for American companies to grow. China does spend about $9 billion a month on clean energy, according to Mr. Chu, and many experts say it will dominate the wind and solar markets in a few years.

To be sure, American companies remain primary innovators in solar and wind, but that edge can be lost if Chinese companies gain the latest technology and then rely on the advantages of cheap loans, land, and labor arranged by the government. Beijing has a policy of curbing foreign competition and copying foreign patents.

Obama and the Democrats in Congress may attempt to boost the US advantage in alternative energy after the election by setting targets for power plants to use clean energy. At least 29 states already have such “renewable portfolio standards.”

That effort is similar to China’s mandate for industries to lower their “energy intensity,” or the percentage of fuel consumed for each unit of economic output. China was able to lower its energy intensity by 15.6 percent from 2005 to 2009, but that effort lagged this year.

All these nations competing in alternative energy have far more to gain by cooperation and setting up stable and clear rules of the road than in destructive legal challenges.

If these industries do take off – and that is still a big if, given the cost competition from coal – everyone on the planet will benefit, not to mention the planet itself in having less carbon pollution.